Dycom (DY) Surpasses Q3 Earnings Estimates, Updates View

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Dycom Industries Inc.DY reported third quarter of fiscal 2019 results, wherein adjusted earnings of 98 cents per share and revenues of $848.2 million beat the Zacks Consensus Estimate by 8.9% and 5.2%, respectively.

However, adjusted earnings declined from the prior-year profit level of 99 cents.

Nonetheless, the company generated double-digit organic revenue growth for the first time since the April 2017 quarter. The upside is primarily an outcome of improving results from top customers, with four of its top five customers growing organically.

Meanwhile, Dycom raised its fiscal 2019 revenue guidance, while slightly lowered the mid-point of EPS view.

Revenue Discussion

Dycom's third-quarter contract revenues of $848.2 million were up 12% year over year. Organic revenues increased 12.9% year over year during the quarter, backed by deployment of 1-gigabit wireline networks and wireless/wireline converged networks. Notably, organic revenues exclude $3.9 million of storm restoration services and contract revenues of $8.8 million from an acquired business in the reported quarter.

Its top five customers contributed 78.4% to total contract revenues, increasing 18.3% organically. Comcast, Dycom's largest customer, accounted for 20.8% of the total revenues. Comcast grew 8.7% organically. AT&T contributed 19.4% and was up 14.9% organically; Verizon accounted for 20.5% and grew 115.9% organically; CenturyLink added 14%; and Windstream comprised 3.7% of the total revenues and grew 1% organically. However, revenues from all other customers declined 2.9% organically in the said quarter.

Dycom's backlog came in at $7.313 billion as of Oct 27, 2018 versus $7.881 billion on Jul 28, 2018.

Dycom Industries, Inc. Price, Consensus and EPS Surprise

Dycom Industries, Inc. Price, Consensus and EPS Surprise | Dycom Industries, Inc. Quote

Operating Highlights

Gross margin was 19%, down 156 basis points (bps) from the year-ago figure. General and administrative expenses, as a percentage of contract revenues, declined 43 bps year over year.

Adjusted EBITDA came in at $98.6 million or 11.6% of contract revenues, reflecting a decrease of 1% or 130 bps from the year-ago quarter.


The company had cash and cash equivalents of $21.5 million as of Oct 27, 2018 compared with $84 million on Jan 27, 2018.

Long-term debt was $867.8 million at the end of the reported quarter compared with $733.8 million at fiscal 2018-end.

Fourth Quarter of Fiscal 2019 Guidance

The company anticipates contract revenues in the range of $695-$745 million. Adjusted earnings are anticipated within 2-24 cents per share. Dycom expects adjusted EBITDA (as a percentage of contract revenues) in the range of 8.4-9.2%.

Fiscal 2019 Guidance

For fiscal 2019, the company anticipates contract revenues in the range of $3.074-$3.124 billion. Adjusted earnings are now anticipated within $2.70-$2.92 versus $2.62-$3.07 per share expected earlier. Dycom expects adjusted EBITDA (as a percentage of contract revenues) in the range of 10.7-10.8% versus 10.7-11.1% projected earlier.

Zacks Rank & Other Stocks to Consider

Dycom currently carries a Zacks Rank #2 (Buy).

Other top-ranked stocks in the construction sector include Jacobs Engineering Group Inc. JEC , EMCOR Group, Inc. EME and KBR, Inc. KBR , each carrying a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Jacobs has an expected earnings growth rate of 20.9% for the current year.

EMCOR has an expected earnings growth rate of 20% for 2018.

KBR surpassed earnings estimates in three of the past four quarters, resulting in average positive surprise of 12.6%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: DY , EME , JEC , KBR

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